Aviva 2005 Annual Report Download - page 209

Components of life EEV return continued
The life EEV operating return comprises the first three of these components and is calculated using economic assumptions as at the
start of the year and operating (demographic, expenses and tax) assumptions as at the end of the year.
2005 2004
Life EEV return £m £m
New business contribution (after the effect of required capital) 612 516
Profit from existing business
– expected return 895 819
– experience variances (39) (15)
– operating assumption changes 17 (7)
Expected return on shareholders' net worth 329 298
Life EEV operating return before tax 1,814 1,611
Investment return variances 2,288 501
Effect of economic assumption changes (406) (318)
Life EEV return before tax 3,696 1,794
Tax on operating profit (566) (490)
Tax charge on other ordinary activities (579) (58)
Life EEV return after tax 2,551 1,246
There were no separate development costs reported in these periods.
New business contribution
The following tables set out the premium volumes and contribution from new business written by the life and related businesses,
consistent with the definition of new business set out on page 204.
The contribution generated by new business written during the period is the present value of the projected stream of after tax
distributable profit from that business. New business contribution before tax is calculated by grossing up the contribution after tax at the
full corporation tax rate for UK business and at appropriate rates of tax for other countries. New business contribution has been
calculated using the same economic assumptions as those used to determine the embedded value as at the start of the year and
operating assumptions used to determine the embedded value as at the end of the year, and is rolled forward to the end of the financial
period. New business contribution is shown before and after the effect of required capital, calculated on the same basis as for in-force
covered business.
New business sales are expressed on two bases: annual premium equivalent (APE) and the present value of future new business
premiums (PVNBP). The PVNBP calculation is equal to total single premium sales received in the year plus the discounted value of regular
premiums expected to be received over the term of the new contracts, and is expressed at the point of sale. The premium volumes and
projection assumptions used to calculate the present value of regular premiums for each product are the same as those used to calculate
new business contribution, so the components of the new business margin are on a consistent basis.
New business New business
Present value of new contribution before the margin before the
Annual premium equivalent1business premiums effect of required capital effect of required capital2
2005 2004 2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m % %
Life and pensions
United Kingdom 1,142 1,166 9,053 9,172 265 269 2.9% 2.9%
France 384 307 3,530 2,782 135 95 3.8% 3.4%
Ireland 100 86 665 561 16 19 2.4% 3.4%
Italy 252 198 2,294 1,799 59 48 2.6% 2.7%
Netherlands (including Belgium
and Luxembourg) 271 261 2,407 2,168 88 80 3.7% 3.7%
Poland 42 37 285 241 14 11 4.9% 4.6%
Spain 240 248 2,013 2,110 175 143 8.7% 6.8%
Other Europe 121 124 739 804 750.9% 0.6%
Continental Europe 1,410 1,261 11,933 10,465 494 401 4.1% 3.9%
International 193 171 1,260 1,024 49 36 3.9% 3.4%
Total (before the effect
of required capital) 2,745 2,598 22,246 20,661 808 706 3.6% 3.4%
1. United Kingdom APE has been restated to include NUER APE volumes of £37 million (2004: £48 million).
2. New business margin represents the ratio of new business contribution before the effect of required capital to PVNBP, expressed as a percentage.
Financial statements
Aviva plc 2005
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